Market Consolidation: Data Communications and Networking, 1986–1988

Abstract

For a company to transform from a start-up with a successful run of products into an industry leader dominating multiple product categories, it must successfully expand into new markets. All too often, the attempt at this transformation ends the company’s independence or causes it to fail altogether. The mid to late 1980s was a challenging time for companies in data communications and networking. Executives were faced with critical decisions about how to execute the company’s business plan: what markets to be in, what technologies to pursue, what products to develop, who to hire or let go, and how to ensure sufficient capital. In both data communications and networking, companies experienced intense competition, a sign of maturing markets. To be successful long term, they needed to increase profit margins beyond the slim margins of products in highly competitive cate­ gories. This could be achieved either by innovating new products in a company’s current markets or expanding into new markets with higher growth. The chal­ lenges were significant, often requiring adaptations in all aspects of operations. This is where many companies become also-rans. In maturing markets, many factors can constrain the performance of even the most successful companies. These factors include errors in strategy, ineffec­ tive management, operational inefficiencies, and poorly executed acquisitions and mergers. For the companies followed in Circuits, Packets, and Protocols, such fail­ ures often led to loss of market share, acquisition, or break-up. In this time period, the data communications companies struggled to respond to the new paradigm in computing—the evolution from data transmission via fixed circuit connections, a Market Consolidation: Data Communications and Networking, 1986–1988